Tag Archives: DaveRamsey

As you approach adulthood and start to think about your future, are you really ready to be financially responsible for yourself? If you answered no, you’re not alone. The Jump$tart Coalition administered a basic financial literacy test to high school seniors, and less than half of the students correctly answered the questions. Another study found that over 75% of college students believe they are not ready to make smart financial decisions for themselves.

Pretty scary, isn’t it? If you think about it, most of your friends probably don’t know how to balance a checkbook. In fact, very few teens actually have a savings account or know what long-term investing means. Do you?

A 2009 Capital One survey discovered that 50% of teens wished they knew more about personal finances. Whether you have never stepped foot in a bank or you are actively saving and investing for your future, all it takes is a little effort and a lot of patience to become confident in your financial decisions.

A Millionaire’s Best Friend

One awesome thing that you can take advantage of is compound interest. It may sound like an intimidating term, but it really isn’t once you know what it means. Here’s a little secret: compound interest is a millionaire’s best friend. It’s really free money. Seriously. But don’t take our word for it. Just check out this story of Ben and Arthur to understand the power of compound interest.

Ben and Arthur were friends who grew up together. They both knew that they needed to start thinking about the future. At age 19, Ben decided to invest $2,000 every year for eight years. He picked investment funds that averaged a 12% interest rate. Then, at age 26, Ben stopped putting money into his investments. So he put a total of $16,000 into his investment funds.

Now Arthur didn’t start investing until age 27. Just like Ben, he put $2,000 into his investment funds every year until he turned 65. He got the same 12% interest rate as Ben, but he invested 23 more years than Ben did. So Arthur invested a total of $78,000 over 39 years.

When both Ben and Arthur turned 65, they decided to compare their investment accounts. Who do you think had more? Ben, with his total of $16,000 invested over eight years, or Arthur, who invested $78,000 over 39 years?

Believe it or not, Ben came out ahead … $700,000 ahead! Arthur had a total of $1,532,166, while Ben had a total of $2,288,996. How did he do it? Starting early is the key. He put in less money but started eight years earlier. That’s compound interest for you! It turns $16,000 into almost $2.3 million! Since Ben invested earlier, the interest kicked in sooner.

What You Can Do Now

The trick is to start as soon as possible. A survey by Charles Schwab found that 24% of teens believe that since they are young, saving money isn’t important. Looks like we just blew that theory out of the water! That same survey also discovered that only 22% of teens say they know how to invest money to make it grow. Why not change that stat and learn how to become a smart investor with your money? Talk to your parents or teachers about how to open up a long-term investment account so you can become a millionaire, too. And remember, waiting just means you make less money in the end. So get moving!

Really, you don’t have to have a lot of money to understand basic, common courtesy when it comes to finances. This isn’t difficult stuff.

So why do some people refuse to leave a decent tip, and why do other people feel like they must tell everyone in their church group how much they make?

These, dear readers, are financial faux pas—the worst of the worst etiquette mistakes people make with their money.

Don’t find yourself falling prey to one of these dubious mistakes.

1. Tipping poorly.

Dear Ms. Bad Tipper: Nothing says, “Thank you for taking my order, bringing my food, refilling my drinks, and providing good overall service,” like that $1.56 tip you left on your $20 order. Just think: If your server invests that $1.56 tip in a 12% growth stock mutual fund, they’ll have $17.20 in 20 years! How fancy! In all seriousness, here’s a tip about tipping: Unless your server cursed at you and threw grilled eggplant at your wife, tip 15–20%. Is that really too much to ask for someone who helped you put food in your belly?

2. Talking about how much money you make.

Unless you’re calling into Dave’s show to make your debt-free scream, your household income really isn’t relevant information in everyday conversation. Usually, people who freely share this type of personal information are high-earners, so it only comes across as bragging. Every conversation is a new opportunity to share their income: “Hey Jim. What about that storm last night? Thought a tree might fall on my house, but I make 250k a year, so we could’ve handled it. How’s your wife?”

3. Talking about how much you give.

This one is just as bad as talking about how much you make. No doubt that building wealth and finding financial peace is all about giving to others and changing your family tree. But that doesn’t mean you should broadcast the amount you tithe and give to charity like it’s a tattoo on your forearm.

Genuine givers are humble and even secretive when it’s called for. If you’re giving in hopes that one day you’ll have a county bridge named after you and a statue in town square, then you’re giving for the wrong reasons.

4. Bumming off your friends all the time.

Every group of friends has one. The bum. The mooch. The guy who always realizes he’s “forgotten” his cash right when the check arrives.

Don’t be that guy. Here’s the thing: You might save a couple of dollars here and there, but at what cost? Everyone in your group of friends knows what’s up. They aren’t stupid. You’ve been labeled as the “group mooch.” And, before long, you won’t get invited to dinner, and then you’ll become “the guy who invites himself to dinner,” in addition to being the group mooch. Then you’ll become a social pariah and never score another date—all because you weren’t willing to pay for a $3 taco.

5. Making unreasonable offers when negotiating.

One of the quickest ways to end a negotiation is to make a ridiculous offer. It shows the seller that you aren’t serious about buying and you think they’re stupid. You’re saying, “Hey idiot. You obviously have no concept of the cost of physical objects that exist on this Earth. But, tell you what, I’ll humor you and offer you 40% of your asking price. You’re welcome. Dummy.”

How do you know if you’re making an unreasonable offer? Put yourself in their shoes. Would you take $150,000 for a house that’s listed for $275,000? Would you take a quarter for a lamp that’s priced $10 at a garage sale?

6. Putting business over friendships.

Dave says all the time that business partnerships are a bad idea. Why? Because business and friendships rarely mix. There are too many complications and emotions involved. But good friends part ways all the time because someone decided to throw business into the mix.

It’s the guy who thinks his buddy with a nice office job is obligated to make a spot for him. It’s the guy who gets into a multi-level scheme and proceeds to badger all of his friends to “not miss this opportunity!” It’s the athlete who signs his first big contract and feels like all of his childhood friends deserve a cut. A business opportunity may improve, but a friendship will soon end. You can count on that.

So why pay for premium channels you never use when, for a fraction of the cost, Netflix, Hulu Plus or Amazon Prime can fulfill all your binge-watching needs?

Good question.

If you’re trying to pay down debts or save up some cash, it may finally be time to cut the cord. Make the switch even easier with these cost-effective alternatives to cable. Chances are you won’t even miss it.

1. Online Network Channels (free)

Most major networks are now posting recently aired episodes to their websites for a limited amount of time. CBS even offers online viewers an additional paid subscription option ($6 per month) to unlock more than 6,500 episodes of everything from The Brady Bunch to The Good Wife.

2. YouTube/Vimeo (free)

YouTube is well known for distributing viral content like Auto-Tune the News and Evolution of Dance. But it’s also a great place to get an education. In the span of a few minutes, you can learn everything from how to put on eyeliner to how to build a bookshelf. Check out Vimeo for indie films and documentaries.

3. Hulu (free or $8 per month)

While Hulu’s free version allows viewers instant access to a limited number of TV episodes through a web browser, Hulu Plus steps it up a notch. For $8 per month,you can access currently airing shows as well as many past seasons, and you can watch either online or on a variety of mobile and set top devices. The catch? You have to sit through repetitive commercials. Lots of them—even with the paid version.

4. Netflix ($8 per month)

Since Netflix posts entire seasons all at once, it’s a great place for binge-watching.You’ll just have to wait until a season ends to even get started. But hey, no commercials. Accessing the service shouldn’t be a problem either. You probably have 10 devices in your house right now that came preloaded with the Netflix app.

5. Amazon Prime ($100 per year)

What initially began as a way to get discounted shipping is now a major contender in the online streaming market. The selection of included shows isn’t as big as Netflix, but the free two-day shipping on most Amazon products makes this a great option if you’re a regular Amazon customer anyway. And if Amazon Prime doesn’t include the show you want, you can usually buy a season pass or pay per episode.

6. Sling TV ($20 per month)

Sling TV launched in January with its Best of Live TV package. It includes 17 live channels like AMC, CNN, ESPN, ESPN2, HGTV and Disney. There are also $5 add-on packages for sports fans, movie buffs and your little ones. If ESPN has been the only reason you’ve clung to your cable box, you may be out of excuses now.

7. HBO NOW ($15 per month)

According to the company’s website, HBO NOW subscribers will have “instant access to every episode of every season” of HBO’s catalog of shows beginning in April. The service will also include popular feature films.

8. HDTV Antenna ($25 and up)

If you really want to cut back, all it takes is an antenna. Luckily they’ve come a long way since your grandmother’s bunny ears. Not only do they look better than the finicky metal rods, but the HD quality is even better than what you get over a cable line. Plug this into a TiVo box, and you can also get full DVR scheduling and recording on all available over-the-air channels. See what stations are available in your area at www.antennaweb.org.

9. Library (free)

Here’s a shocker: You can find everything from contemporary TV shows to workout videos at your local public library. The only downside is that you have to drive to a physical location, but at least you can keep your rentals for a week or two.

This is by no means a comprehensive list of alternatives to cable, but it’s a great mix-and-match way to get started. And even if you’re not quite ready to give up your favorite sports or movie channels, you can always call your cable provider and try to negotiate a better deal.

These aren’t chalkboard-squeaking, SAT-sweating, pencil-breaking numbers. These are fun numbers. You know the ones that show themselves on bills and bank accounts, the ones that make you wealthy. These are the numbers of the budget.

For 20 years, Dave’s class Financial Peace University (FPU) has taught families how to win with money by laying a solid foundation, which is—you guessed it—a budget! The 10 numbers below prove that even the most free-spirited among us can benefit from a little focus on the numbers each month.

1 – One piece of paper is all you need to make a budget. Forget the fancy spreadsheets and scientific calculators—you just need space to write everything out. Of course, if you’re a nerd and it makes you feel better, go ahead and fire up Excel or print one of Dave’s budget forms to get as detailed as you’d like.

$8,000 – Families who learn to budget in FPU report an average turnaround of $8,000 in the first 90 days. This represents $5,300 reduction in debt and $2,700 saved. Think about where you were at just three months ago. Wouldn’t it feel nice to be $8,000 ahead today?

We’d love to help you get there with Dave’s $8,000 Turnaround Giveaway, celebrating 20 years of life change through FPU. You can enter once a day through September 2!

56% – We talk about budgeting all the time, so it might sound like it’s what all the cool kids are doing. It’s not. In fact, 56% of Americans admit they don’t budget. Many of them don’t even know what they spend each month on housing, food and entertainment. Don’t be like these folks. Be weird!

0 – A zero-based budget is the key to winning with money. Give every dollar a name, on paper, on purpose before the month begins. This means your income minus your expenses should equal zero. Take control of your money by telling it what to do!

15% — Studies show people spend 15% more money when they pay with a card instead of cash. Identify budget categories where you tend to overspend. Then make a cash withdrawal for those areas and place the money in the envelope. When it’s gone, it’s gone!

3 – A kid’s budget is broken into three areas: give, save and spend. Budgeting helps kids understand the value of work and how to use their own money to make purchases and bless others. It also teaches kids to be content—a refreshing quality in today’s youth.

20 billion – The turnaround tracker is at 20 billion andcounting. More than 2.5 million families have taken FPU since it launched in 1994. The tracker is a real-time calculation of the estimated turnaround that occurs each time another family signs up for FPU. While you’ve been reading this, another family likely paid off their car loan and saved $1,000!

18% – Families who use the zero-based budget save 18% more money than people who don’t. This means they’ll build an up emergency fund and pay off debt more quickly simply because they’re applying the wisdom of giving every dollar a name. If you’re smart, you do what works.

4 – The first time you budget, it’s going to hurt. The next month, you’ll still be confused. By the third month, your needs—and the ability to meet those needs— will finally start to make sense. By month four, you’ll feel like an old pro. What once took hours will eventually take just twenty minutes and might—just might—be a little fun.

312 – Dave and Sharon Ramsey filed for bankruptcy in September 1988. As a result, they made big changes to how they handled their money. Dave and Sharon began budgeting immediately and the budgeting continues today. They’ve completed 312 budgets so far. Yes , Dave and Sharon still complete a budget each month—and that means you should too.

But then you feel the gravitational pull of the Dollar Spot. Look at all those adorable, unnecessary knickknacks! You grab a few goodies for the kids and keep moving.

Then you see a gorgeous green scarf up ahead. You steer forward to take a peek. Just as you suspected, it looks perfect over your light gray pea coat. Plus, accessories are 15% off right now!

In the cart it goes.

Maybe you’ll just glance at the jewelry while you’re here . . . Any of this sounding familiar?

Name Your Dollars

Target knows their customers. And they know it’s hard to pass up a bargain—especially a cute bargain.

So how do you stop your impulse shopping and actually spend less at this mega chain?

As simple as it sounds, you must make a budget. That means give every dollar a name.

Here’s how it works: At the beginning of each month, sit down with your spouse and create a spending plan for everything from gasoline to eating out. If you want some new clothes, that’s okay, just work them into your budgeting categories ahead of time.

Once you’ve spent every dollar on paper,then you can start spending the real stuff (we like to use cash). Just don’t go over what you’ve allocated!

Watch Out for Sales

Easier said than done, right? Target is, after all, brilliant when it comes to sales.

They offer racks upon racks of discounted clothing, reduced-price housewares at the end of every aisle, and a customizable Cartwheel app, which offers rotating deals on everything in the store you already love.

But how much is all this “saving” really costing you? Math time, people.

If you get 25% off a decorative pillow that you never intended to buy, you’re still paying 75% more than you would have! That’s called spending, not saving.

Avoid these shopping traps by making a list before you go. Then practice some self-discipline once you’re there. If an on-sale item isn’t on your list, don’t put it in your cart—Cartwheel or not.

Delay Gratification

If you’re having trouble sticking to your new budget and shopping list, use your psychic abilities. Look into the future and imagine how you’ll be using this “must-have” item a month from now.

Will your kids still be playing with that cheap paddle ball game? Will that owl statue actually fit on your fireplace? Or will those fake leather heels start rubbing blisters on your feet?

Nine times out of 10, the answer will be to put it back. But what if you still want it?Then you wait.

Work it into next month’s budget (and next month’s list) and revisit your feelings in 30 days. If you still love it, buy it without the guilt.